Buying a Home with a Reverse Mortgage:
HECM vs. Proprietary Options
Did you know you can actually BUY a home with a reverse mortgage? And depending on your age, you may have more than one way to do it.
I’ve been helping seniors with reverse mortgages since 2008, and one of my favorite uses for these loans is helping retirees purchase their next home without taking on a required monthly mortgage payment.
Maybe you’re downsizing, moving closer to your grandkids, or finally buying that home in Florida you’ve been dreaming about.
Instead of spending all your savings on the new house—or taking out a traditional mortgage with monthly payments—you may be able to put down a portion of the purchase price and let the reverse mortgage cover the rest.
There are actually two ways to do this: an FHA-insured HECM for Purchase for buyers 62 and older, and proprietary reverse mortgage programs that are available as early as age 55(depending on your state).
Let’s look at how both work, what they cost, and which one might make more sense for you.
How Does Buying a Home with a Reverse Mortgage Work?
Buying a home with a reverse mortgage is actually pretty simple.
Instead of paying cash for your new home or taking out a traditional mortgage with monthly payments, you bring a substantial down payment to closing, and the reverse mortgage covers the rest.
Here’s the fun part: you don’t have to make monthly principal and interest payments.
You still own your home, just like you would with a traditional mortgage. You’ll still need to pay your property taxes, homeowners insurance, and any applicable HOA fees, and keep the home maintained. But eliminating that required monthly mortgage payment can make a BIG difference when you’re living on retirement income.
And you don’t have to be 62 to take advantage of this strategy. While the FHA-insured HECM for Purchase requires borrowers to be at least 62, some proprietary reverse mortgage programs allow you to purchase a home as young as 55.
The amount you’ll need to put down depends on your age, the home’s value, interest rates, and the reverse mortgage program you choose.
Buying a $600,000 Home with a Reverse Mortgage
Let's compare two reverse mortgage purchase options for a 72-year-old buying a $600,000 home in Florida. Both examples include closing costs.
That's $67,000 more you could keep in your retirement savings instead of bringing it to closing!
And with either option, there are no required monthly principal and interest payments. You still own the home and remain responsible for property taxes, homeowners insurance, applicable HOA fees, and maintenance.
Important: This example illustrates reverse mortgage purchase options for a borrower age 72 purchasing a $600,000 home in the State of Florida. The initial investment figures shown ($415,000 for HECM and $348,000 for proprietary) include closing costs and are provided for illustration only. Actual required funds vary depending on the borrower's age, the state where the property is located, property value and eligibility, interest rates, lender guidelines, and specific program availability. Proprietary reverse mortgage products are not available in every state. Both programs have ongoing property-charge, maintenance, and occupancy requirements. Interest and other financed charges generally accrue to the loan balance. This comparison is not a loan offer or commitment to lend.
Four Ways to Buy a Home in Retirement:
Which Makes the Most Sense?
If you’re getting ready to buy a home in retirement, you’ve got some decisions to make. And I’m not talking about whether you want the house with the pool or the one overlooking the golf course.
I’m talking about how you’re going to pay for it.
Most retirees immediately think of two options: pay cash or take out a traditional mortgage. But there are actually four ways to approach your purchase, and the right choice can make a BIG difference in how much money you have left to enjoy retirement.
Let’s take a look.
1. Pay Cash For Your New Home
Simple, straightforward, and no mortgage debt. Sounds pretty good, right?
The downside is that a substantial amount of your retirement savings gets tied up in your house. If you’re pulling money from a traditional IRA or 401(k), you could also be looking at a pretty hefty tax bill.
2. Use a Traditional Mortgage
A traditional mortgage lets you keep more of your savings invested while financing the purchase.
But here’s the catch: you’ve now got a monthly mortgage payment. And when you’re retired and living on a fixed income, that payment can put a real dent in your cash flow.
You’ll also need to qualify under traditional mortgage income and debt guidelines.
3. Buy with a HECM for Purchase
If you’re 62 or older, a HECM for Purchase allows you to buy a home without having to make monthly principal and interest payments.
Instead of paying cash for the entire home, you make a substantial down payment and the HECM covers the rest.
Being able to keep some of your cash in your wallet and not having monthly principal & interest payments really helps during retirement!
The downside? HECMs have FHA mortgage insurance, closing costs, and interest that generally gets added to your loan balance over time. But for many retirees, keeping more money in savings while eliminating a required monthly mortgage payment can be a pretty attractive combination.
4. Use a Proprietary Reverse Mortgage
Some proprietary reverse mortgages allow you to purchase a home as young as 55. They can also be a great option for buyers purchasing higher-value homes or properties that don’t qualify for FHA financing.
And here’s where things get interesting: depending on your age, the state you’re buying in, and the loan program, a proprietary reverse mortgage may require LESS money down than a HECM.
Remember our $600,000 Florida example? The proprietary reverse mortgage required $67,000 less upfront, including closing costs!
Of course, proprietary loans also accrue interest, and their terms and availability vary by lender and state.
HECM for Purchase vs. Proprietary Reverse Mortgage:
What's the Difference?
Not all reverse mortgages are created equal, especially when you’re buying a home.
For years, the FHA-insured HECM for Purchase was the primary option for seniors looking to buy a home with a reverse mortgage. But proprietary reverse mortgages have opened up some pretty interesting possibilities.
Today, buyers as young as 55 may qualify for a proprietary reverse mortgage, depending on the state. And even if you’re over 62, the proprietary option might make more sense.
So how do you know which one is better?
Well, there’s no universal winner. It depends on your age, the home you’re buying, where you’re buying it, and how much money you’d like to keep in your retirement accounts.
Here’s how the two programs stack up.
| Feature | HECM for Purchase | Proprietary Reverse |
|---|---|---|
| Minimum Age | 62 | As young as 55* |
| FHA Insured | Yes | No |
| Mortgage Insurance | FHA mortgage insurance required | No FHA mortgage insurance |
| Monthly Principal & Interest Payments | Not required | Not required |
| Higher-Value Homes | Subject to FHA lending limit | Higher loan limits may be available |
| Condominiums | Must meet FHA eligibility requirements | Often more flexible* |
| Down Payment | Generally higher down payment | Generally lower down payment |
| Non-Recourse Protection | Yes | Yes |
*Proprietary reverse mortgage eligibility, minimum age, property requirements and availability vary by state and lender. All loans are subject to underwriting and property approval. Borrowers must continue to pay property taxes, homeowners insurance, applicable HOA fees and maintenance costs, and satisfy occupancy requirements. Interest and financed charges generally increase the loan balance over time.
Here’s something I always tell my clients: just because you qualify for a HECM doesn’t mean it’s automatically your best option.
I’ve seen situations where a proprietary reverse mortgage requires significantly less money upfront. And I’ve seen others where the HECM makes more sense.
That’s why I compare the available programs instead of trying to squeeze everyone into the same loan.
Remember, the goal isn’t just to buy the house. It’s to make sure you’ve still got enough money left to enjoy living in it!
Reverse Mortgage for Purchase - Pros and Cons
I’ve been helping seniors with reverse mortgages since 2008, and I’ll be the first to tell you they’re not for everyone.
Buying a home with a reverse mortgage can be a terrific way to protect your retirement savings while eliminating the need for monthly principal and interest payments. But there are trade-offs, and you should understand them before making a decision.
So let’s go through the good, the bad, and a few things you might not have considered.
✅ The Pros
No Required Monthly Mortgage Payments
No required monthly principal and interest payments means more breathing room in your retirement budget.
Keep More of Your Retirement Savings
Instead of spending all your cash on a new home, you can keep a portion available for emergencies, investments, or simply enjoying retirement.
Potentially Reduce Taxable Withdrawals
If you’re using money from a traditional IRA or 401(k), a smaller withdrawal could mean a smaller tax bill. Your CPA can help you evaluate that benefit.
More Purchasing Flexibility
You may be able to purchase a home that would otherwise require more cash upfront, without taking on required monthly principal and interest payments.
Non-Recourse Protection
You and your heirs are protected from personal liability beyond the home’s value under the applicable non-recourse loan terms.
❌ The Cons
A Substantial Initial Investment
This isn’t a 3% or 5% down mortgage. You’ll need significant funds to purchase your home.
Your Loan Balance Generally Grows
Interest and financed charges accumulate over time if you aren’t making voluntary payments.
Reverse mortgages have closing costs, and HECMs also have FHA mortgage insurance premiums. That can make them expensive for short-term ownership.
Potentially Less Equity for Your Heirs
As the balance grows, it can reduce the equity left in the property, depending on future appreciation and other factors.
Ongoing Homeownership Responsibilities
You still need to pay property taxes, insurance, applicable HOA fees, and maintain the home. It must also remain your primary residence under the loan terms.
Can a Reverse Mortgage Help You Buy a More Expensive Home?
Here’s something most folks don’t realize about buying a home with a reverse mortgage.
You don’t necessarily have to use one to SAVE money. You can also use one to buy a much nicer home with the money you were already planning to spend!
Let’s say you’ve set aside $600,000 set aside to purchase your dream home.
You could spend that $600,000 on a house and own it free and clear. Nothing wrong with that!
But what if you could take that SAME $600,000 and use a reverse mortgage to purchase a $1,050,000 home instead?
Now we’re talking!
Maybe that means a waterfront property, a bigger home closer to the grandkids, or the house in that beautiful community you’ve had your eye on.
And here’s the best part: you still wouldn’t have any required monthly principal and interest payments.
Of course, you’ll have a reverse mortgage balance that generally grows over time, and you’ll still be responsible for taxes, insurance, maintenance, and applicable HOA fees.
But if you’ve worked hard your whole life and want to enjoy a little more of what retirement has to offer, this strategy is certainly worth exploring.
Same $600,000. More Buying Power.
What if the money you planned to spend on a $600,000 home could help you purchase a home worth $1,050,000 instead?
Mortgage Balance: $0
Remaining Purchase Funding: Reverse Mortgage*
A more expensive home with the same initial cash investment!
And with a qualifying reverse mortgage, no required monthly principal and interest payments.
*Important: This is a hypothetical illustration of potential purchasing power, not a loan quote or commitment to lend. The $1,050,000 purchase assumes a 72 year old borrower using a proprietary reverse mortgage to purchase in Florida. Actual purchasing power and required initial investment, including closing costs, vary based on borrower age, the state where the property is located, interest rates, property value and eligibility, lender requirements, and program availability. The illustration does not establish that $600,000 will cover all required funds for every borrower. Reverse mortgages accrue interest and financed charges, generally increasing the loan balance over time. Borrowers must continue paying property taxes, homeowners insurance, applicable HOA fees, and maintaining the property as their primary residence in accordance with loan terms.
Buying a Multi-Million-Dollar Home with a
Jumbo Reverse Mortgage
Let’s take this one step further.
What if you’re shopping for a $2 million, $3 million, or even a $5 million home?
Maybe it’s a waterfront property in Florida, a luxury condominium, or simply the retirement home you’ve spent your whole career working toward.
And maybe you’ve got the money to pay cash.
But just because you CAN write a check for $3 million doesn’t necessarily mean you SHOULD.
That’s where a jumbo reverse mortgage for purchase can get really interesting.
Unlike the FHA-insured HECM, which has a limit on the home value used to calculate your loan, proprietary (or jumbo) reverse mortgages can accommodate much higher property values. Most programs offer loan amounts up to $4 million for qualified borrowers (and a couple lenders will go higher as an exception).
Instead of tying up millions of dollars in your new home, you may be able to keep a significant portion of your investment portfolio intact, while enjoying the home you really want.
And just like a HECM, there’s no requirement to make monthly principal and interest payments.
Of course, that doesn’t mean the loan is free. Interest and financed charges generally increase your loan balance over time, and you’ll still be responsible for taxes, insurance, maintenance, and applicable HOA fees.
But for someone who has worked hard to accumulate substantial wealth, preserving liquidity while buying a luxury retirement home can be a pretty attractive strategy.
Why Would a Wealthy Retiree Use a Jumbo Reverse Mortgage?
Here’s something I’ve learned from my clients over the years: having a lot of money doesn’t mean you want to spend it all!
Let’s say you’ve accumulated a $4 million investment portfolio and you’re shopping for a $3 million retirement home.
Sure, you could liquidate a significant portion of those investments and pay cash. But doing so might trigger capital gains taxes, disrupt your retirement strategy, and leave a whole lot less money invested.
A jumbo reverse mortgage offers another possibility: use a portion of your own funds toward the purchase and finance the remainder without required monthly principal and interest payments.
Now, I’m not suggesting everyone with a few million dollars should run out and get a reverse mortgage. Borrowing costs matter, and keeping investments in the market carries its own risks.
With that said, if your goal is to preserve liquidity, avoid unnecessarily liquidating investments, and still purchase the home you really want, it’s worth comparing the numbers.
Interested in Buying a Luxury Home with a Reverse Mortgage?
Let’s take this one step further.
What if you’re shopping for a $2 million, $3 million, or even a $5 million home?
Maybe it’s a waterfront property in Florida, a luxury condominium, or simply the retirement home you’ve spent your whole career working toward.
And maybe you’ve got the money to pay cash.
But just because you CAN write a check for $3 million doesn’t necessarily mean you SHOULD.
That’s where a jumbo reverse mortgage for purchase can get really interesting.
Unlike the FHA-insured HECM, which has a limit on the home value used to calculate your loan, proprietary (or jumbo) reverse mortgages can accommodate much higher property values. Most programs offer loan amounts up to $4 million for qualified borrowers (and a couple lenders will go higher as an exception).
Instead of tying up millions of dollars in your new home, you may be able to keep a significant portion of your investment portfolio intact, while enjoying the home you really want.
And just like a HECM, there’s no requirement to make monthly principal and interest payments.
Of course, that doesn’t mean the loan is free. Interest and financed charges generally increase your loan balance over time, and you’ll still be responsible for taxes, insurance, maintenance, and applicable HOA fees.
But for someone who has worked hard to accumulate substantial wealth, preserving liquidity while buying a luxury retirement home can be a pretty attractive strategy.
Real Life Examples of Buying a Home with a Reverse Mortgage
We’ve talked about how reverse mortgages for purchase work, compared the different programs, and gone through the pros and cons.
But sometimes the best way to understand a reverse mortgage is to see how it actually helped someone.
I’ve been helping seniors with reverse mortgages since 2008, and some of my favorite success stories involve people buying their forever homes.
Here are two couples I had the pleasure of helping.
Frank & Barb: Keeping $134,000 More in Retirement Savings
Frank and Barb were 69 and 67 when they decided to leave New Jersey and move to Pennsylvania.
They’d found a beautiful home in a 55+ community called The Vineyards. It had everything they were looking for, including a wonderful clubhouse and much less outdoor maintenance.
And they had enough money to pay cash.
But there was a problem.
Much of their savings was in qualified retirement accounts. Their CPA wasn’t thrilled about the idea of withdrawing nearly $400,000 to buy the house, especially considering the potential tax consequences.
And Frank wasn’t interested in taking out a traditional mortgage with monthly payments.
Fortunately, their real estate agent knew about the HECM for Purchase program and introduced them to me.
Here’s how it worked:
Home purchase price: $395,000
Their initial investment: $246,000(this included closing costs)
Purchase price difference financed: $149,000
Required monthly principal and interest payments: $0
Instead of spending nearly $400,000 to buy their home, they were able to keep a substantial portion of their savings available for retirement.
And they got the home they wanted without adding a required monthly principal and interest payment to their retirement budget.
That’s a pretty terrific outcome!
Bob & Leslie: Turning a $1.6 Million Budget into a
$2.7 Million Dream Home
Bob and Leslie were ready for a change.
They’d been living in a condominium with expensive HOA fees, endless rules, and restrictions on just about everything. After years of condo living, they were ready for some space, privacy, and a place where the entire family could get together.
Their dream? A beautiful single-story home near Wellington, Florida, with a big backyard, plenty of land, and a swimming pool where the kids and grandkids could spend their weekends.
They had a pretty healthy budget, too. $1.6 million to spend on their next home.
And while that buys a beautiful home in South Florida, the property they REALLY fell in love with was listed at $2.7 million.
Quite a bit over budget!
But here’s where things got interesting.
After we explored their reverse mortgage purchase options, Bob and Leslie learned they could potentially purchase that $2.7 million estate with an initial investment of just $1,416,000.
That’s actually LESS than the $1.6 million they were originally planning to spend!
Here’s how their purchase worked:
Dream home purchase price: $2,700,000
Their initial investment: $1,416,000
Cash remaining from their original budget: $184,000
Required monthly principal and interest payments: $0
Instead of compromising on the house they wanted, they were able to stretch their purchasing power and get their absolute dream retirement estate.
Now, picture the weekends. The grandkids splashing around in the pool, everyone gathered around the barbecue, and plenty of room for the whole family to enjoy themselves.
No more cramped condo living or worrying about whether the association allows another family gathering.
And best of all, Bob and Leslie didn’t have to spend their entire original housing budget to make it happen.
That’s what I love about reverse mortgages for purchase. Sometimes they’re not about buying a less expensive home. They’re about helping you afford the retirement lifestyle you’ve worked your entire life to enjoy.
Reverse Mortgage for Purchase Requirements: Who Qualifies?
One of the biggest misconceptions about buying a home with a reverse mortgage is that you need perfect credit, a huge retirement income, or millions of dollars in the bank.
Fortunately, that’s not necessarily the case.
I’ve helped people with credit scores in the 500s and others with scores over 800. Some had substantial investment portfolios, while others were living primarily on Social Security.
The important thing is understanding how reverse mortgage lenders evaluate your situation. And remember, HECMs and proprietary reverse mortgages have different requirements.
Let’s go through the basics.
Age Requirements: 55 vs 62
For an FHA-insured HECM for Purchase, borrowers must be at least 62 years old. If one spouse is younger, special non-borrowing spouse rules may apply.
Proprietary reverse mortgages are different. Some programs allow borrowers to purchase a home as young as age 55, depending on the state and lender.
And don’t assume that being over 62 means a HECM is your best option. As we’ve already seen, a proprietary reverse mortgage may provide better purchasing power even for someone in their 70s or 80s.
How Much Money Do You Need Down?
Unlike a traditional mortgage, where you might put 5%, 10%, or 20% down, buying a home with a reverse mortgage requires a much larger initial investment.
The exact amount depends on your age, interest rates, the purchase price, and whether you’re using a HECM or proprietary reverse mortgage.
And here’s something important: the state you’re buying in matters, too! Proprietary programs and certain closing costs vary by state.
That’s why I prefer running actual numbers rather than throwing out a generic down-payment percentage.
Remember our earlier Florida example? The 72-year-old buyer purchasing a $600,000 home needed $415,000 with the HECM, compared with $348,000 using the proprietary reverse mortgage. Both figures included closing costs.
Quite a difference!
Credit Score and Income Requirements
Here’s some good news: you don’t necessarily need excellent credit or a large monthly income to qualify for a reverse mortgage purchase.
With a HECM, there’s no universal minimum credit score like you see with many traditional mortgages. Instead, we review your credit history, income, expenses, and ability to keep up with your financial obligations.
That includes property taxes, homeowners insurance, and other living expenses. Generally, we look at a two year history of paying your property taxes, mortgage, items on your credit report and HOA payments.
Proprietary reverse mortgages have their own underwriting requirements, which vary by lender. One lender waives the financial assessment if your credit score is over 720.
The bottom line? Don’t assume you won’t qualify just because you’re retired, living on Social Security, or have had a few bumps in your credit history.
Property Requirements: Houses, Condos and More...
The home you’re buying must meet the requirements of your reverse mortgage program.
For a HECM for Purchase, eligible properties can include single-family homes, two-to-four-unit properties, townhomes and qualifying condominiums.
Proprietary reverse mortgages can sometimes offer more flexibility, particularly with higher-value homes and condominiums that don’t meet FHA requirements.
But every lender has its own property guidelines, and not every property will qualify.
One important requirement: the home must be your primary residence. A reverse mortgage for purchase isn’t designed to finance your vacation home or investment property.
Can You Afford the Ongoing Expenses?
This one is especially important.
Just because you won’t have a required monthly principal and interest payment doesn’t mean your home is free to own.
You’ll still need to pay property taxes, homeowners insurance, applicable HOA fees, and maintain the property.
With a reverse mortgage, the lender performs a financial assessment to make sure you can reasonably handle those responsibilities(again folks with high credit can get around this with proprietary/jumbo reverse mortgages).
In some situations, funds may need to be set aside to cover future property taxes and insurance.
My goal isn’t simply to help you qualify for a reverse mortgage. It’s to make sure the home you’re buying is one you can comfortably afford to enjoy throughout retirement.